The Abu Dhabi National Oil Company (ADNOC) announced that it is building the world’s largest single underground project ever awarded for oil storage, with a capacity of 42 million barrels of crude oil in Fujairah on the eastern coast of the UAE valued at $1.21 billion.
An Engineering, Procurement, and Construction (EPC) contract has been awarded to South Korea’s SK Engineering and Construction (SKEC) to construct the three underground storage caverns, each with a capacity of 14 million barrels, deep below ground level.
The contract is the largest for a single project award for underground crude oil storage in the world with approximately 50 percent of the contract spend feeding back into the UAE economy through ADNOC’s In-Country Value program.
The agreement was signed in the presence of Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces Sheikh Mohamed bin Zayed Al Nahyan, and President of S. Korea Moon Jae-in at the Blue House, in Seoul.
Through the agreement, the UAE aims to strengthen its position as a reliable supplier of crude oil as well as give ADNOC greater flexibility, allowing it to manage and optimize its delivery schedule and support its broader move into trading. This will also enhance its position as one of the key trading and supply partners in Fujairah’s growth as a global oil and products storage and trading hub.
The agreement was signed by UAE Minister of State and ADNOC Group CEO Sultan Ahmed al-Jaber and SKEC President & CEO Jae Hyun Ahn.
The construction of the world’s largest single underground project ever awarded for oil storage will enhance the UAE’s energy security, in line with the wise guidance of the country’s leadership, stated Jaber.
He added that developing this strategic oil storage mega facility in Fujairah will also support and further enable broader trading ambitions, strengthening the company’s ability to respond efficiently and competitively to the needs of the customers, while also providing it with greater flexibility to proactively respond to market needs and commercial opportunities.
“This project is a testament to the strong strategic partnership between UAE and South Korea and to the capability of SK Engineering and Construction Co. Ltd, given the scale, sophistication, and value of this construction”
In 2018, the works commenced and the first phase of the ADNOC Fujairah Underground Storage, involving the construction of an access tunnel, were completed.
When complete in 2022, the ADNOC Fujairah Underground Storage will be one of the largest facilities of its kind in the world and able to store three different types of crude oil, providing ADNOC with increased flexibility to export crude through Fujairah’s Arabian Sea oil terminal.
SKEC CEO also commented on the agreement saying: “We are progressing well in our project with ADNOC in the construction of the world’s largest single storage facility in hard rock, located in Fujairah.”
He asserted that SKEC is committed to providing high-quality services, as well as supporting the local UAE economy.
The EPC contract award followed a robust tendering process that included a rigorous assessment of how much of the contract value would support the growth and diversification of the UAE’s domestic economy through ADNOC’s In-Country Value program.
About $600 million are expected to flow back into the UAE’s economy, and the contract will give a significant stimulus to the country’s products and services, manufacturing and assembly and infrastructure sectors, as well as creating additional employment for UAE nationals.
Earlier in November, ADNOC signed a MoU with Indian Strategic Petroleum Reserves (ISPRL) to explore storing ADNOC crude oil at ISPRL’s underground storage facility at Padur in Karnataka, India.
This agreement followed the arrival of the final shipment of the initial delivery of ADNOC crude to be stored in another ISPRL underground facility in Mangalore, earlier the same month.
ADNOC also stores up to 6.29 million barrels of crude oil at the Kiire oil terminal in Kagoshima, southern Japan, under an agreement with Japan’s Ministry of Economy, Trade, and Industry.
Korean companies are also important customers of ADNOC’s crude oil and refined products, including LPG, base oil, naphtha, and fuel oil.